Dollar Cost Averaging: When Should You Buy?

About the Author

The following article was created by FEGcentral author and Telegram community member @cosbo.

The volatility of the crypto market, stemming from a wide range of factors like Elon Musk’s tweets, hackers emptying yet another CEX of tens or hundreds of million $, or theatrics like certain countries “banning” crypto over and over again, can wreak havoc on the price of most coins and tokens, and FEG or ROX are no exceptions to that rule.

Despite the craziness of the market, many people have continued to keep making profits and steadily build up their holdings using something called DCA or “dollar cost averaging”.

When should you buy, for maximum profits?

No one really knows, it’s a game of dice most of the times, so if someone says they do know, they’re likely looking to scam you somehow.

Using your money to invest in a crypto project can be a highly emotional practice and as a result you will likely be wasting a lot of time watching YouTube tutorials of so called crypto gurus trying to learn how to read the market and waste countless hours pondering over complex crypto charts, to try and time your buys just right.

The problem, and the ugly truth, is that there is no easy way to time the market and attempting to do so will cause you to waste many hours and days looking at charts only to eventually still invest either too early or too late or, more likely, even become paralyzed by indecision and not invest at all.

So, again, when should you actually buy, for best profit chances ?

Well, the answer is to buy all the time, in small increments, so that way you will never miss the dip, which means the easiest, fastest and simplest solution for your crypto problem is dollar cost averaging.

What is Dollar Cost Averaging (DCA)?

In short, is a way to build wealth safely over time, so it is ideal for long-term investors.

Although DCA is a popular way to buy crypto, it isn’t unique to crypto, investors have been using this strategy for a long time to manage the stock market volatility, so it’s a tested and proven method, not some new experimental idea.

The logic is simple, instead of using all your money for one big purchase of FEG or ROX, dollar cost averaging means you buy smaller amounts at regular intervals, regardless of the price, so that it helps you avoid buying too much FEG when it’s quite expensive or too little when it is cheapest. Over time, this method will result in increased returns.

Often, beginner traders fall into the trap of “emotional trading”, where buying and selling decisions are dictated by psychological factors like fear or excitement, which can lead to really bad decisions like panic selling during a particularly big dip or buying right at the top due to fear of missing out (FOMO).

With DCA there is no room for doubt, greed or fear because now you have a plan and you will execute that plan. While also avoiding FOMO and emotional trading, perhaps the most appealing feature of this strategy is how stress-free it is, even while most other investors are too afraid to buy, always wondering if they are too early or too late to the game. 

How does it work ?

DCA can be divided in two parts:

  • The fixed amount to invest.
  • The regular interval when to invest that amount.

This means the strategy is simple:

  • Decide on an amount to invest regularly, a small amount of money you’re comfortable putting aside, one that you won’t miss or feel, so that it doesn’t interfere with your normal life expenses, such as food, rent and so on.
  • Come up with a schedule for the buys, be it daily, weekly, monthly or you can even use your job’s pay cycle for it, so that every time you get the salary you invest a small portion of it into crypto.
  • Start investing and keep at it, as long as you stick to your schedule and repeat the purchases over a long period of time, you are using the strategy correctly.

Why use Dollar Cost Averaging ?

  • A key advantage is that it makes investing more practical, less emotional, and reduces the effects of investor psychology and market timing on their portfolio. By committing to this approach, investors avoid the risk that they will make counter-productive decisions out of greed or fear, such as buying too much when prices are rising or panic-selling when prices decline. This plan would provide you with an investment strategy that ensures you will manage to buy the dip and not just buy the top due to FOMO, like most emotional investors do.
  • It’s a passive investing strategy which allows you to minimize the time you must spend administering your portfolio. In effect, this strategy removes the work of attempting to time the market in order to make purchases at the best prices … because let’s be honest, odds are ultra low that you will manage to buy FEG or ROX at their lowest and sell at their highest, these are fantasies, so to keep it realistic, you need a plan and DCA is the plan to use. The futile attempt of trying to time the market just right to actually catch that fabled bottom is an incredibly risky and difficult feat to pull off, bordering on impossible.
  • Another benefit is that you can get started straight away, DCA will help those crypto investors who only have small amounts of funds available at any one time. This way, an investor doesn’t have to save up huge amounts of money and wait for the right time to buy. In dynamic markets like cryptocurrency where price volatility is a major drawback, waiting for the right time might take away many opportunities to make profits. Dollar cost averaging is an expert way to evade mistiming and amplifies the profitability of investment by taking advantage of price dips.
  • With DCA you are able to completely ignore the day-to-day swings of the market, where the value of (for example) ROX can shift by thousands of dollars in a manner of hours, so such fluctuations will not affect you emotionally nor will it have a detrimental impact on your wallet’s value in the grand scheme of things.
  • It is also worth mentioning that dollar-cost averaging is more effective in a bear market. So when other people are afraid, that’s when you stand the most to gain because you buy more tokens for less money, as long as you remain committed to buying as per your schedule. 

Look at FEG and ROX as a long-term investment, rather than a pump and dump get rich quick scheme, so don’t let momentary dips/fluctuations bother you in the slightest.

People have a tendency to buy into the hype cycle and then sell out of fear when the losses become “unbearable”, it’s stupid, illogical thinking, but buying high and selling low because of fear happens all the time.

DCA makes sense for the long term, as is designed to help offset any negative effect on an investment caused by short term market volatility and essentially now you’re trading based on a strategy, not based on feelings. 

If you buy a little bit all the time, in the long term you end up with a pretty darn solid portfolio for which you’ll be thankful, and all done with relative safety and without losing much time studying the market.

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